The Effect of reconstruction on the efficiencies of state banks

THE EFFECT OF RECONSTRUCTION ON THE EFFICIENCIES OF STATEBANKS(Master Thesis)Author: Emre TOPSAKALABSTRACTIn this study, the effect of reconstruction on the efficiencies of TurkishState Banks in 1997-2005 is reviewed.In the efficiency analysis of the banks, Data Envelopment Analysis(DEA) method is used. 11 banks in Turkey are selected as the observationset of the implementation model. 3 of them are state-owned, 7 of them areprivate-owned and 1 is foreign-owned. The criteria in selection of the banksare: they must have operated continuously in the period of study, they havenot been taken under the control of regulation authority and altogether theycan represent a substantial share of the total assets of Turkish bankingsystem. The input and output sets of the model are selected with respect totheir ability to show the effect of reconstruction on the operational efficiency.Therefore, the number of branches, employees and total other operatingexpenses are selected as the input set and total credits, savings and totalfees and commissions received are selected as the output set of the model.In taking the time influence on the variation of efficiencies intoconsideration, Malmquist total factor productivity (TFP) index method wasused.The study showed that the biggest difference between efficiencies ofstate banks and other banks occurred in the periods 2000-2001 and 2001-2002. First period was when the financial crises peaked in Turkey and thesecond one is when the reconstruction in banking sector began. It can besaid that, although state-owned banks affected by the crises worse thanprivate-owned banks, they benefited more from the reconstruction program.The results of the study support the argument that the reconstructionprogram started in 2001 in Turkey had positive effects on the operationalefficiencies of State Banks.